FSA's, HSA's, HRA's, oh my!

You like to save money on your groceries, clothes, and other merchandise, right? So why is it that many Americans pass up the opportunity to save hundreds of dollars to put towards medical expenses each year?

It could be that many medical benefits are relatively new, and it’s easy to be intimidated by the information. Does this sound like you? If you answered yes, it’s time to think about these benefits as medical savings accounts, giving you more control over a portion of your health expenses. That’s it, nothing more. The next step is to learn about the different options so you can make the best choice.

So here we go: FSA, HSA, and HRA… What are they?

FSA (Flexible Spending Account): This account is set up through an employer and sets aside pretax dollars for health-related expenses.

FSA's cover costs of co-pays, prescriptions, and even bandages. It’s helpful for parents and others who expect medical bills.

Currently, you must spend the money in the account by the end of the calendar year, or it goes to your company. Most importantly, in order to get reimbursed, it’s important to keep all of your receipts!

Helpful hint: Be sure to check with human resources about what’s covered. You could be compensated for things like massages, or even gas mileage for a doctor’s visit!

HSA (Health Savings Account): HSA’s are available through employers and financial institutions. This account can be invested, the cash rolls over, and you can withdraw the money at the age of 65.

In order to sign up, you must have a high-deductible insurance policy of at least $1,250 for an individual, and $2,500 for family. Depending on the plan, you can contribute before taxes or after and take the deduction. Just know that many accounts have fees, so make sure to ask a benefits manager about them. Also make sure to avoid using the money for nonqualified medical expenses before 65, as you could pay an extra percentage on your taxes.

Helpful hint: If you choose this account, it may be best to talk to a financial planner.

HRA (Health Reimbursement Account): This is the only health savings account that your employer pays for completely.

It’s just free cash from your employer, who receives a tax deduction. Some require you to file claims for reimbursements, while others give you a card for health expenses.

If you consider making a career change, just remember you do not get to keep the money in your HRA if you leave your job.

Helpful hint: Some companies allow you to use the money for your retirement if you’ve been there long enough. Be sure to see what’s available for you.

So there you have it! Painless, right? Now that you have information for each option, which do you think is best for you?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on your taxes, your investments, the law or any other business and professional matters that affect you and/or your business.